A. A holder of or subscriber to shares of a corporation shall be under no obligation to the corporation or its creditors with respect to the shares other than the obligation to pay to the corporation the full consideration for which the shares were issued or to be issued.
B. No person who becomes an assignee or transferee of shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall be personally liable to the corporation or its creditors for any unpaid portion of the consideration. No executor, administrator, conservator, guardian, custodian, trustee, assignee for the benefit of creditors or receiver shall be personally liable to the corporation as a holder of, or subscriber to, shares of a corporation but the estate and funds in his hands shall be so liable. No pledgee or other holder of shares as collateral security shall be personally liable as a shareholder.
History: 1953 Comp., § 51-24-24, enacted by Laws 1967, ch. 81, § 24.
ANNOTATIONSCompiler's notes. — This section is derived from Section 25 of the ABA Model Business Corporation Act.
Piercing the corporate veil. — A corporation will ordinarily be treated as a legal entity separate from its shareholders, and individual shareholders cannot be held personally liable for the corporation's debt. Under certain circumstances, however, courts may exercise their equitable powers to pierce the corporate veil and require shareholders to answer for the corporation's liability. To pierce the corporate veil, the district court must find that the corporation was operated in a fashion not to serve the valid goals and purposes of that corporation but instead under the domination and control and for the purposes of some dominant party, that there is some form of moral culpability attributable to the shareholder such as use of the corporation to perpetrate a fraud, and that there is some reasonable relationship between the injury suffered by the plaintiff and the actions of the defendant. Morrissey v. Krystopowicz, 2016-NMCA-011.
Where defendant set up corporations to own and operate a number of nursing homes in New Mexico, and where defendant channeled millions of dollars from the revenues of the nursing homes to an account controlled by defendant, from which hundreds of thousands of dollars in distributions were made to defendant and a co-owner of the corporation, evidence that defendant exercised improper domination of the corporations, that defendant used the corporations for improper purposes, and that defendant's abuse of the corporate form resulted in a sham corporation leading to plaintiff's inability to recover for her injury, was sufficient to pierce the corporate veil of the sham corporations such that defendant can be held liable for the corporations' liabilities. Morrissey v. Krystopowicz, 2016-NMCA-011.
Law reviews. — Annual Survey of New Mexico Corporate Law, see 17 N.M.L. Rev. 253 (1987).
For note, "Legal Malpractice - Membership in a Professional Corporation Does Not Confer upon an Attorney-Shareholder a Limitation on Personal Liability for Attorney's Breach of Duty: Sanders, Bruin, Coll & Worley, P.A. v. McKay Oil Corp.," see 31 N.M.L. Rev. 637 (2001).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 18 Am. Jur. 2d Corporations §§ 42, 45; 18A Am. Jur. 2d Corporations §§ 186 to 188, 249 to 257, 850, 852, 865 to 877.
Liability of one whose name appears upon corporate books as a stockholder without his consent, 3 A.L.R. 1049.
Liability upon stock subscription payable in services which are rendered unnecessary by the insolvency of corporation, or other cause, 6 A.L.R. 277.
Right of subscriber to defeat liability on ground of failure to comply with statutory requirement of payment at time of subscribing, 6 A.L.R. 1116.
Right of creditor of insolvent corporation to sue stockholder at law upon unpaid subscription, 7 A.L.R. 100.
Creditor's knowledge that stock is unpaid as affecting stockholder's liability, 7 A.L.R. 972, 69 A.L.R. 881.
Unauthorized change in name, personal liability of officers or stockholders for debts of corporation making, 8 A.L.R. 583.
Liability of transferees on unpaid subscription to stock issued in exchange for property or services at an overvaluation, 12 A.L.R. 449.
Forfeiture of stock for nonpayment of assessments as affecting liability to creditors of stockholder, 19 A.L.R. 1096.
Enforcement during liquidation or receivership, of unpaid stock subscriptions, to equalize loss among stockholders, 35 A.L.R. 493.
Reorganization, consolidation, or merger of corporation as affecting liability on stock subscription, 45 A.L.R. 1031, 89 A.L.R. 770, 154 A.L.R. 427.
Liability of stockholder as affected by business of corporation being turned over to an officer of the court or other persons, 55 A.L.R. 327.
Right of stockholders contributing to make good losses to be reimbursed by, or out of assets of, corporation, 55 A.L.R. 794.
Effect of stockholder's bankruptcy upon his liability as stockholder, 62 A.L.R. 988.
Liability under trust fund doctrine, of subscribers to stock of corporation the charter of which has been canceled for reasons other than insolvency, 71 A.L.R. 103, 90 A.L.R. 1350.
Right of person who has paid corporation's indebtedness to be subrogated to creditors' right to enforce stockholders' statutory liability, 78 A.L.R. 611.
Death of stockholder as affecting statutory added liability, 79 A.L.R. 1537, 96 A.L.R. 1466.
Validity and effect of agreement absolving one, in whole or in part, from liability on subscription to corporate stock, 81 A.L.R. 198.
Liability as shareholder of pledgee of stock, 82 A.L.R. 565.
Assignment or sale of stockholders' statutory liability, 82 A.L.R. 1285, 159 A.L.R. 1114.
Added liability of holders of corporate stock the issue of which was ultra vires, invalid, or irregular, 86 A.L.R. 816.
Fraudulent conveyance or transfer by stockholder as regards his liability as stockholder to creditors of corporation, 89 A.L.R. 751.
Liability on stock standing in name of one as trustee or in other fiduciary capacity, 91 A.L.R. 257, 97 A.L.R. 1250, 117 A.L.R. 655.
Change in or renewal of corporation's obligation as affecting liability of stockholder of bank or other corporation, 97 A.L.R. 630.
Setoff of liability of stockholder of insolvent corporation against corporation's debt to him, 98 A.L.R. 647.
Life interest and remainder in corporate stock as affecting stockholder's statutory liability, 99 A.L.R. 505.
Liability of officers, directors or members of defectively organized corporation to one of their number for advancements or commissions, 115 A.L.R. 658.
Promise by stockholder to pay debt of corporation, 35 A.L.R.2d 906.
Reduction of capital stock and distribution of capital assets upon reduction, 35 A.L.R.2d 1149.
Duty and liability of closely held corporation, its directors, officers, or majority stockholders, in acquiring stock of minority shareholder, 7 A.L.R.3d 500.
18 C.J.S. Corporations §§ 414 to 432.